Sunday, 30 January 2011

It's not often that this blogger reads the Toronto Globe and Mail - despite that newspaper's reputation - but he was intrigued by the little story that appeared in one of his webzines last Friday which clearly emanated from that newspaper. It's a report about Nortel bonds. In March 2009 - just after Nortel filed for bankruptcy - these were fetching 10c on the dollar. In other words, investors were not expecting that Nortel's assets would actually cover much of the debt. Last week the bonds were up to 88c on the dollar - that's an 880% rise in just under two years. So - how did that come about?

Well, the Globe and Mail adds, it's at least partly due to the potential from the still unsold patent portfolio, which we've already reported on here. It's fascinating to see how sophisticated investors are now pricing in potential returns on IP sales into the valuation of bonds.

Wednesday, 26 January 2011

IP Finance is hosting this little opinion piece from Bob Knock (Consultant, FirstAssist Legal Protection). Do please feel free to comment on it. For the record, Bob is an enthusiastic believer in litigation as an insured risk and in the delicious pleasures of game theory. He writes:

"Fuel consumption statistics are a key consideration when purchasing a car -- presumably because a driver wants to understand how much it will cost to make practical use of the car. Are such considerations made when a party is obtaining an intellectual property right? For example, how much it would cost to enforce a monopoly in the case of a patent or exploit and defend a reputation if a trade mark is obtained? How much protection do intellectual property rights provide? Without the ability to litigate are they a toothless lion?

It was suggested in Lord Justice Jackson’s Review of Civil Litigation Costs in England and Wales that SMEs could enjoy access to justice by subscribing to before-the-event (BTE) legal expenses; BTE was an active consideration in the impact assessment pertaining to the Patents County Court consultation.

There are a small number of providers of specialist IP legal expenses insurance. These policies can indemnify legal expenses if a party needs to pursue an infringer. Having BTE in place demonstrates that the custodians of a company have risk management strategies in place and obviates the need to hold large cash reserves or seek finance to pay legal fees.

If SMEs can litigate more easily by virtue of BTE, will this change behaviour and attitudes towards intellectual property rights? House prices are a frequent reference in some journalism. It is, however, interesting to consider that these prices are set by the > 1% of housing stock which may be on the market at any one time. Are there parallels with commercial behaviour and the extent to which IP strategies could be influenced by the small number of cases which are litigated or the likelihood of litigation?

In many income-based IP valuation models, litigation support is a factor. Measures could be taken of how well protected a market is and how difficult it is for competitors to encroach or the likelihood of damages being recovered if there is an infringement. Calculations made, allowing for different levels of litigation protection, could quantify the benefits of a legal protection policy in terms of the value of the company, much of which may vest in intangible assets secured by IPRs.

Insurance should allow SMEs to pool resources so that, when a potentially catastrophic event occurs, they can be afforded protection. This involves the insurer maintaining a reserve of funds that will be used to indemnify the legal expenses of whichever businesses’ IPRs are infringed. In order for a fund of appropriate size and containing appropriate risks to be maintained, membership of the pool, or purchase of a policy, must be attractive and commercially rational. To achieve this end it is important for underwriters to understand the views of IP owners and practitioners.

Burton Malkiel, in his book A Random Walk Down Wall Street, hypothesised that share prices follow a random walk. If an analogy can be supported between a share becoming popular and going up in price and an IPR becoming popular and then being infringed it may be erroneous to price a book of IP protection business on claims histories. We are, therefore, influenced in our underwriting approach by game theory.

It is interesting to note that game theory can be used to demonstrate that the chances of a response being posted to a blog article should diminish if there is an obvious response".

Tuesday, 18 January 2011

There's a detailed report emanating from Bloomberg Businessweek which explains a little bit about the EU's current investigation into the branded and generic drug markets. The European Commission has been looking into the market place and is worried - just like the US government - that major branded pharmaceutical companies are misusing the patent system to ham consumers (and at least in Europe the government, which ultimately pays for much of European health care directly or indirectly through the tax system). The concern is of course, that pharmaceutical companies file invalid and follow-on patents to prevent their generic competitors bringing out substitute drugs.

The EU commission has now - following unannounced inspections - also called raids- on drug companies last year - started a so-called monitoring exercise to review the activities of the branded pharmaceutical companies. The report quotes Joaquin Almunia, the EU's competition commissioner in stating that patent settlements “are an area of particular concern because they may delay the market entry of generic medicines,” Joaquin Almunia, the EU’s competition commissioner, said in the statement.

Over in Germany, the VFA - the German Association of Research-based pharmaceutical companies has been active in arguing the case for branded medicines. The message is directed at the current reforms to the German health system being promoted by the Federal Ministry of Health. In many ways the issues are the same: how to ensure adequate and affordable health care whilst providing sufficient funds to research companies through the health system to incentivise research. It's clear that no pharmaceutical company can live on grants from the government alone - and the health care, whilst it is by no ways perfect, provides a mechanism to ensure that successful innovative products are rewarded. Patents play a crucial role here in protecting and defining the bounds of the innovation. On the other hand there is a need to reduce the costs of the health care system and clearly generic drug producers have a major role here - this author will normally ask his local (German) pharmacist for "ASS" tablets or wait to stock up on the generic aspirins when he is in the US (note: Aspirin (R) is a registered trademark in Germany). Where are the boundaries between efficient innovation and cost-effective health care? There's almost certainly non "one-size" fits all - the control through the European Commission is probably the only way of policing the marketplace to ensure that there is a fair playing field.

Monday, 17 January 2011

Neil Wilkof's post on the IPKat last week, "Retainer Fees and IP Practice: Questions, Questions Everywhere" (here), suffered the fate of many a fine piece of blogwriting that gets posted on a Friday -- it got lost in the lead-up to the weekend and was then submerged under other posts.

Since so many of the money-related issues in Neil's post speak directly to readers of this weblog, it seems a good idea to draw it to the attention of those IP Finance subscribers who either don't see the IPKat at all -- and, yes, there are many of them -- or who may simply have missed it in the rush to get out of the office for the weekend.

Readers' comments are particularly appreciated. Unbelievably there's just one so far ...

Last Tuesday, in "Damages in France: is there a sign of an upward trend?" (here), I ventured to suggest that a recent French damages award in a trade mark dispute indicated that the French courts were becoming more generous in their awards.

Not so, says my good friend Richard Milchior (Granrut), who assures me that French infringement damages have already been generous for some time, even before the coming into force of the EU's IP Enforcement Directive. Richard has even helpfully pointed me towards this useful table compiled by the PIBD, with some details of actual awards -- so you can believe him! As Richard says:

"As I told you, more or less the international community thinks that the French court are not awarding damages ( obviously there is an assimilation between damages and big amounts);
The truth is:
(1) this is wrong
(2) if bigger damages are not awarded it is often due to the fact the plaintiff refuses to provide information which is (rightly or wrongly considered as business secrets) to the court, they do not understand that it is needed , they are to lazy to do the necessary work or their lawyer and /or trade mark agent does not do what it needs to do. ...

Be aware that often in France the amount awarded for unfair competition or parasitism could cover damages to well known marks since we had the habit of using tort law for this even before the CTM Regulation and the trade mark directive".

Thursday, 13 January 2011

IP Finance understands that the Business Development Academy (BDA)'s Valuation of Emerging Technologies Seminar, developed in the United States, is on its way to Europe. This is an unusual seminar in that it explains and analyses the applicability of over a dozen valuation methodologies including the following:

For those who like to sink their teeth into something substantial, this seminar will be treating its European participants to the unveiling of the Patent Valuation Gauntlet. This reputedly consists of more than 400 issues which, the seminar's architects maintain, should be included in patent analysis. The categories to be discussed will include the "usual suspects" such as Citation Analysis, Prosecution History, Claims Analysis, Investor Profile and Sustainability in Opposition, and lots more besides.

This course is one of the four courses required to earn theCertified Patent Valuation Analystdesignation. The London course will be held on March 14 and in Amsterdam on March 17. The venue of the London seminar is the offices of Holborn-based law firm Collyer Bristow. More information about this course—including registration details—is available here.

There's a tremendous amount of shadow boxing going on in the telecommunications patent space relating to ownership of patents essential to the operation of the LTE standard. The :Rethink Wireless website reports that "chinese vendors are determined to increase their share of patents as well as equipment sales at the 4G stage" and that the Chinese telecommunications company ZTE is claiming to own "7% of the essential patents in LTE" which is apparently only "just behind" compatriot Huawei and Ericsson.

Looking through the patent databases what struck this author is that many of the so-called "essential patents" have not yet been actually granted. So whilst ZTE may be claiming that they have actually 7% of all granted patents, it probably means that they have 7% of the filed patent applications potentially relevant to the LTE standards. The value of the patents can really only be determined when they have been granted - and experience shows that many of them will not be granted. Ultimately the test of a decent patent grant is whether the patent will actually stand up in litigation. And the German litigation relating to IP.COM's portfolio as well as InterDigital's UK and US litigation shows that may patents may either be held to be not valid or the granted claims do not actually read onto the standard. What struck this author when looking through the ZTE's patent portfolio is that many of the documents are rather short and contain sometimes the barest of details about the invention. It's only a first impression - but it will be interesting to see how many of the documents actually withstand the challenges of litigation. Compare that to the substantially longer disclosures of Nokia, Ericsson and others and it may well be that these companies longer experience of drafting patent specifications for litigation will be crucial.

Rethink Wireless correctly goes on to point out that the important issue for LTE vendors and buyers is not who owns a patent, but how much the proprietor (patent applicant) will charge other vendors and buyers for the right to use the patents. Attempts are being made to set up one-stop shops or patent pools, but there are at least three competing operators. Some holder of relevant IP rights, most notably Qualcomm have been reluctant to join such pools and apparently intend to stick with the bilateral licensing agreements. These generally favour the largest patent owners who own significant IP rights and operate a system of cross-licensing with balancing payments.

The main interest is the rise of newer companies like ZTE and Huawei which to date have had very little IP rights, for example for the GSM or UMTS networks. ZTE's analysis suggests that InterDigital is the leading holder of essential patents in LTE, with its Patent Holdings arm controlling 13% and its Technology unit 11%. Next comes Qualcomm with 13%, Nokia and Samsung on 9% each, Ericsson and Huawei on 8%, ZTE at 7%. LG, with 6%, and NTT DoCoMo with 5%, bring up the rear, while the remaining 11% is held by 'others'. Whatever the basis for the establishment of the list - patent applications or granted patent - it certainly indicates the stronger weighting towards IP holders coming from Asia than for earlier telecommunications standards.

Wednesday, 12 January 2011

There are few areas of the trademark and brand-driven business that I find more interesting than luxury brands. When trademark law took shape in the 19th century, marks and signs primarily served the honorable, but commercially boring, task of enabling merchants to communicate with the public about the source of a specific trader's goods. While the "good old source theory" of trademark law still serves as the conceptual underpinning for the trademark right, the commercial uses of trademarks have developed in various other directions. None is more distinctive than the development of luxury brands with international reach (indeed, at the Paris-based business school ESSEC, here, there is a full MBA program devoted to the topic).

Even for those of us who do not embark on a career in the luxury goods business (and who may treat luxury goods as primarily a spectator sport), developments in the area continue to fascinate. It is against this backdrop that I read with interest an article in the 6 December 2010 issue of Bloomberg Business Week entitled "Luxury Retailing: Chinese Shoppers' Long March Through Europe." What I found particularly compelling are the dynamics related to the pricing and marketing of luxury goods in Paris and Shanghai, respectively, especially in light of the increasing presence of the Chinese consumer in the flagship stores for these goods, be it in Paris or otherwise in Western Europe.

It is estimated that over 2.5 million Chinese from the mainland visited Western Europe in 2010 and the number is expected to increase to over 3 million by the year 2012. Looked at from a different angle, it is believed that one-quarter of all European luxury goods sales are being made to Chinese purchasers (others may complain about the perceived undervalued yuan, but its 12% appreciation vis-à-vis the Euro has certainly accelerated this process). As one Paris consultant observed: "Today, it's Chinese tourists that are brought in by big buses in groups."

So why should a Chinese consumer prefer to buy his or her luxury goods in Paris? One answer is selection, even if the number of boutiques offering luxury goods for sale in Shanghai has increased. Another is the elusive sum total of the shopping experience in Paris and other Western European locations.

The more interesting reason given is price. A Chanel Jumbo handbag costs more than $4,700 in Shanghai but only $3,900 in Paris. A Hermès product runs $8,800 in Shanghai but only $6,500 in Paris (in both instances, the plane fare differential is strictly extra). The price differential is ascribed to Chinese import duties (up to 20%) and value-added tax of 17%, although I cannot quite believe that VAT does not also apply to purchase of the product in Paris, given that France is the progenitor of the value-added tax.

In any event, what jumps out here is the question of how these luxury goods manufacturers can tolerate such large price differentials, even if they are due to taxes and the like, rather than to market forces. My impression is that the luxury goods business usually resists such differentials, not only because of the opportunity for price arbitrage by customers, but also because of the muddled message given to consumers by these different prices. After all, crucial to these products is a consistent sense of "what these products are worth", wherever they are purchased.

It is no surprise, therefore, that luxury brand manuacturers will apparently be
increasing the price of their goods in Western Europe by 5% to reduce this differential. If this occurs, it is a genuuinely fascinating result. Think about it: prices in Western Europe for these products will be elevated in order to come closer to the price of the equivalent product in China.

Thus, the visitor from the U.S. or Brazil, or the Parisian matron from the 8th arrondissement, will also see the price go up, even though such purchasers probably are otherwise uninterested in what goes on in China. If the foreign (non-Chinese purchaser) also has the misfortune to be paying for the product in a currency that is depreciating against the euro, the 5% increase will even be more. Alternatively, the would-be purchaser simply does not buy the item due to the increased cost of the item, although presumably that lost sale is more than made up by the increasing revenue received from each Chinese purchaser laying out 5% or more for the same item in the store in Paris.

For several years now, we read about the "China price", being the low cost of Chinese production that makes manufacture in many other countries uncompetitive by contrast. In the case of luxury goods, however, the "China price" seems to have the opposite effect, leading to an increase in the price for the same goods outside of China. How very, very curious.

Tuesday, 11 January 2011

Last October Tribunal de Grande Instance de Paris ruled in favour of French national railway operator Société nationale des chemins de fer français (SNCF) in a dispute concerning the registration of a domain name which infringed the company's SNCF trade mark. Opting to sue for trade mark infringement rather than merely go for a domain name transfer via a cheap-and-cheerful domain name arbitration, SNCF hit the jackpot. The court not only ordered the transfer of the domain name but ordered the infringer to pay the following sums:

* €10,000 for trade mark infringement;
* €5,000 for violation of the SNCF's rights in the domain name sncf-usa.com and
* €5,000 for perpetrating a misleading commercial practice.
* Costs of €5,000.

The authors of the source from which this note is taken add:

"In terms of brand protection strategy, there is little doubt that the prospect of court action is a more powerful deterrent than a UDRP decision. The defendant in the present case is now in the position of having to find €25,000, a significant sum which will certainly make him and others think twice about such behaviour".

Even apart from the deterrent factor, it seems to this blogger that, on the whole, damages in French trade mark infringement proceedings have in the past tended to be fairly low. While €25,000 is not exactly a king's ransom, it strikes him as indicating that, possibly since the coming into force of the EU's IP Enforcement Directive, French damages awards may have become a little more generous. IP Finance would be happy to hear from French readers as to whether this impression is correct.

Source: "Court decision sends strong warning to cybersquatters", written for World Trademark Review by David Taylor and Vincent Denoyelle (Hogan Lovells, Paris).

Wednesday, 5 January 2011

"Has the Shift to Stronger Intellectual Property Rights Promoted Technology Transfer, FDI, and Industrial Development?" This question is the title of a Harvard Business School Working Paper prepared by the threesome of Lee Branstetter, C. Fritz Foley and Kamal Saggi and the FDI in this context is "foreign direct investment". In short, the piece reviews the authors' own recent research which finds that that IP rights reform does indeed increase technology transfers, foreign direct investment inflows and industrial development. For those who like also places the findings of this work in the broader context of the literature. The authors conclude as follows:

"A substantial and growing body of work indicates that IPR reform is associated with an acceleration of industrial development. Earlier concerns that a shift to stronger IPR would freeze the industrial development of countries – or send it into reverse – now seem overblown.
However, it is important to keep in mind that the empirical results described above are focused on one type of effect of stronger IPR and the results may not generalize to all countries. For example, the poorest countries attract little FDI, and a change in the IPR regime may do relatively little to induce large FDI flows simply because the degree of IPR protection is only one of many determinants of inward FDI [This is an important caveat: the multiplicity of determinants includes elements that are difficult to build into mathematical models too, such as political and social stability].

Much remains to be done to extend recent research. Further empirical analyses could reveal what sorts of countries and industries obtain the greatest boost from IPR reform and whether increases in industrial development persist in the long run. Research that employs high quality price data in a way that allows analysts to conduct welfare calculations would be particularly informative. Additional work could also reveal the extent to which production shifting reshaped the Northern economies. Is the temporal coincidence of rising patent rates, higher R&D intensity, and accelerated productivity growth in the United States with the shift of production overseas a consequence of the mechanisms emphasized in these models described above? [I wonder whether the increasing use of the Patent Cooperation Treaty, and the larger number of countries which now belong to it, makes it difficult to compare patent rates as between the same and different categories of country]

There is also a clear need for more theoretical work in this area. Under what circumstances is the acceleration of industrial development induced by stronger IPR truly welfare enhancing? Under what circumstances are the benefits of more rapid industrial development undercut by other effects of stronger IPR? [More work must be done on the effect of stronger IPR in terms of rights other than patents too. And unregistered rights regimes pose their own problems for economic analysts as well as for investors] The mathematical challenges that theorists confront in building models that could address these questions are clear, but so are the potential benefits for policymakers and empirical researchers. Given the number of questions for which we still lack complete answers, this domain is likely to be an area of active research in economics for some time to come".

Licensing and litigation experts are well acquainted with the 25% rule for calculating a reasonably royalty which a licensee might be prepared to pay to the patent proprietor when licensing a patent. The rule has had a long genesis and was apparently originally formulated by Robert Goldscheider's analysis of patent licensing rates made by a Swiss subsidiary of a US company to around 18 companies licensees throughout the world ("Use of the 25% rule in valuing IP", 37 les Nouvelles 123, 123 December 2002). A number of other empirical studies have appeared to confirm the general applicability of the rule - and many licensing executives use the rule when establishing their baseline for negotiations.

The underlying assumption is that a licensee should maintain a majority - say 75% - of the profits of a patented product because the licensee has undertaken substantial development, operational and commercialisation risks. The other 25% should go to the patent holder as a licence fee. The 25% rule can be used for calculating a reasonable, running royalty rate by first of all estimating the licensee's profits for the product incorporating the patent and then dividing the total profit by the total cost of sales. This gives a profit rate - of which 25% is the running royalty rate. This rate is then applied going forward for licensing deals - or backwards for calculating damages in litigation

The Court of Appeals for the Federal Circuit (CAFC) - the Appeals court in US patent cases - looked into the validity of the rule in a case Uniloc v Microsoft Corp. and concluded that the rule was - for the purposes of the calculation of damages in litigation - fundamentally flawed. The CAFC noted that the court (and lower courts) had accepted the rule in the past because it had never been effectively challenged. The CAFC noted that there had been a number of criticisms of the rule over the years:

The rule failed to take into account the unique relationship between a patent and an accused (allegedly infringing) product

The rule failed to take into account the unique relationship between the parties in the litigation

The rule was essentially arbitrary

The CAFC pointed out that patent proprietor has to prove the level of damages and that any arguments regarding the level of damages must be tied to the facts of the case. Citing a whole raft of case law, the CAFC concluded that the 25% rule of thumb was an abstract and theoretical concept. The 25% rule failed to provide any basis for the hypothetical negotiation between the two parties regarding the level of the royalty or offer any evidence regarding usual royalty rates for a particular technology, industry or party. In other words - the CAFC was not prepared to accept a royalty rate which it considered purely arbitrary and wanted to see comparative figures produced.

The implications for litigation are tremendous. Calculation of damages will rely on the ability to produce comparable figures from other sources - such as stock exchange filings or the annual LES royalty surveys. Licensing executives may not need to be so worried. The concept of the reasonable royalty based on a negotiation between parties is generally one that is practiced in reality. The 25% rule is often used as a starting point for the negotiation and is just one data point. Other data points include similar licensing agreements made with other companies and also publicly available data from sources such as SEC filings. It is unlikely that a court would attempt to change royalty rates in an agreement made entered into freely by two parties, merely because the royalty rate calculation was based on the (unapproved) 25% rule. Only in the unlikely event that one of the parties was put under duress to accept the royalty rate based on the 25% rule would a court be likely to overrule the calculation.

Tuesday, 4 January 2011

After a decade of efforts, the jury is still out: what are the long-term prospects for convincing consumers to pay for recorded music in an online/digital world. Sure, we have the per item model of Apple's iTunes, the subscription model a la Pandora and music streaming enterprises such as Spotify. Still, my anecdotal impression is that unauthorized accessing of musical works continues to take place in a big way alongside authorized accessing of such works. Moreover, I have not encountered any data that suggest that the various efforts to find commercially and legally workable models have led to a trend reduction in unauthorized downloading and the like. Based on these observations, the best we can say is that the glass is still half-full from the point of view of those who view compensating creators of musical works to be a desirable long-term state of affairs.

For those of you, however, who find this half empty/half full scenario an acceptable result under the circumstances, The Economist has offered sobering commentary that the situation can become a lot bleaker for music rightsholders. In particular, in the 4 December 2010 article, "Free as a Bard: Music in China", the piece describes the depressing attempts to create a commercial market for recorded music in China. Let's start from the end. Gary Chen, described as a music promoter who migrated into the world of online music, says bluntly that Chinese consumers simply "won't pay a penny" for recorded music. Based on his unhappy experiences, Mr Chen may be well suited to back up his bleak observation.

Thus, in 2006, he established the website Top100.cn, based on a mixed offfering of both a la carte items and a subscription service. Alas, it seems, the prices charged for these offerings were low, but not "low enough." The question is whether any price is low enough to induce a critical mass of Chinese consumers to pay for their recorded music. Certainly, it would seem, Mr Chen is trying. Top100 last year began to offer consumers free MP3 downloads, supported solely by advertisements. The service is supported by record companies. As well, Google has invested in the website (Google provides 60% of the traffic to the site, so it would seem).

The financial results of the advertising options are beyond disappointing, at least for the moment. Mr Chen has garnered the equivalent of about $1.5 million dollars. Before you say -- what a pittance, consider the really telling data point. In all of China, for 2009, "sales of recorded music amounted to just $75 million." In any event, Top100.cn is "profitable" only on an operating basis, i.e., before it takes into account the amounts owed to the recording companies. As well, Baidu, China's largest search engine, offers an MP3 service that offers music (presumably without cost). The record companies claim that Baidu enables links to pirated contents; however, the Chinese courts have not agreed, with the result that Baidu constitues a formidble challenger to Mr Chen's business model.

Perhaps out of desperation, perhaps out of inspiraton, Mr Chen is trying to introduce additional schemes to monetize musical contents. In the first, he is attempting to entice users to pay a sum for bundled collections of music, the provenance of which are recognized musicians and other respected figures in the musical world. The second is a subscription service for access to music in the cloud, which enables the user to download music to a variety of potential devices. What is one to make of this story? Much depends upon how one views the Chinese market as a harbinger or an outlier (albeit a giant one). If China is a harbinger, then the future looks bleak for the music industry. In a bit of a reversal, while China has been serving as the principal engine of economic growth, here it may be serving as the engine for the potential death-knell of the commercial music world as we know it.

If China is an outlier, however, there is no material threat that the music industry will not be able to right itself in other markets, even if it encounters a hostile environment in China. Under such a view, Mr Chen's lament could be seen as not coming from an innovative entrepeneur seeking to succeed against all the odds, but from a businessman who simply has been unable to succeed in a big way in his home market.

Imagine that you are an executive in the music industry: do you opt for the Chinese situation as a harbinger or as an outlier? Much rides on your answer to the question in formulating a strategy, or set of strategies, to deal with the challenge of monetizing music in the coming decade.

Monday, 3 January 2011

New Year’s Day finally saw the acquisition of Smith Electric Vehicles UK by its US counterpart and licensee, Smith Electric Vehicles US (SEVUS). Founded in the 1920’s, Smith UK is the world’s largest manufacturer of commercial electric vehicles, producing the world’s largest battery powered truck, the Newton.

The acquisition offer was originally made in March 2010, a press release explaining that “the transaction includes the purchase of all of the Smith US common stock currently held by Tanfield (Smith UK’s parent company), as well as the License Agreement by and between Tanfield and Smith US, and the intellectual property necessary to allow the combined businesses to operate globally.” According to the FT, SEVUS was offering £37m plus a £33.3 m stake in the enlarged company if it was able to float before September 2015.

However, by the time Heads of Terms were signed in August 2010, a press release indicated that Tanfield “expected to retain a significant interest in the combined entity and share in its future growth and opportunity”, noting that “SEVUS's plans include a possible public offering of its equity securities on the US NASDAQ exchange, which could be as early as the first half of 2011.” According to GigaOM, quoting SEVUS CEO Bryan Hansel, “the revised agreement calls for Smith U.S. to buy an agreement under which Tanfield licenses its electric vehicle technology to Smith for a 1-percent-per-vehicle royalty fee, as well as all the assets of SEV UK and the intellectual property necessary to allow the combined businesses to operate globally.”

The final deal, according to a December press release, gives Tanfield $15m, split into twenty monthly payments, and a 49% holding in the enlarged SEVUS business. Thus Tanfield would appear to have sacrificed jam today in expectation of much more jam on the floatation of SEVUS in 2011. But are the stock markets ready for another Electric Vehicle IPO? GigaOM notes the successful IPO by Tesla Motors in 2010 but observes that:

“aside from their shared focus on electric vehicles, Smith US and Tesla could hardly be more different. Tesla has its carefully crafted high-profile, glitzy brand, consisting of luxury vehicles priced for a sliver of wealthy consumers (although lower-priced models are set to launch in the coming years). Smith U.S., on the other hand, has kept a low profile building electric trucks for unglamorous commercial fleets.”

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